Yesterday’s heavyweight in the movie rental business is on the ropes. Blockbuster owes more than $950 million and revenues are shrinking. The premier ‘bricks and mortar’ movie rental giant of the 90′s is collapsing under its own weight and sadly for faithful employees things could have been different. You see Blockbuster turned down an offer from Netflix to buy their company. That’s right Netflix offered Blockbuster Inc. the option to buy them and Blockbuster said no. Ouch! Ouch! Ouchies!
Think about that. The former CEO at Blockbuster, John F. Antioco looked at the proven Netflix model—Netflix had already operated successfully for three years, announcing their billionth DVD delivery in February 25, 2007—and declined. This myopic decision changed the fate of many.
Blockbuster in its role as the 800 lb. gorilla failed to see what we all know now to be obvious: the logistics of shipping DVD’s from strategically placed warehouses with an automated online service cost a fraction of the property rentals and employee salaries that would finally hamstring Blockbuster.
Not to mention the fact that Netflix had no punishing late fees—something that always irked me when I was a Blockbuster customer.
Not to gloat over a conglomerates demise but to try and learn the lesson.
To understand how impossible it would be to recognize this staggering, strategic error one would have to experience the fog of leadership. When you are at the top it’s very difficult to believe that your course is fallible. You might look at the upstarts with their new technology as nothing more than a passing fancy rather than openly try to understand how lifestyles and business processes are changing.
In fact the Blockbuster-Netflix phenomenon is a perfect manifestation of how the Internet changed our lives. And how it happens right under our collective noses without our being aware. This is written by someone who couldn’t understand in 1994 how Yahoo! would ever make any money. Or what the buzz was about twitter or Facebook. Ok now I understand. OK, now I get it!!
The lesson is never underestimate the power of technology and the fact that the world wide web is not done with us. No it’s not. Not by a long shot.
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